The number of US jobless claims totaled 881,000 compared to the forecast of 950,000 and the previous reading of 1.011 mln. In addition, the ISM Business Activity Index in the services sector came in at 56.9 (vs. the median forecast of 57.0 and the previous reading of 58.1).
The gains were capped by a sell-off in US equity indices. Investors have lost faith in the high-tech sector, while economic data on business activity stateside confirmed fears of a lengthy and challenging recovery ahead. Facebook, Apple, Amazon.com, Microsoft, and Nvidia pulled back in the range of 3.7% to 9%.
Today’s macro agenda (GMT 3)
09:00 Germany: factory orders (July)
09:45 France: budget balance (July)
11:30 UK: construction PMI (August) and inflation forecast (Q3)
15:30 US: nonfarm payrolls and the unemployment rate (August); Canada: employment change and employment rate (August)
17:00 Canada: Ivey PMI (August)
20:00 US: Baker Hughes weekly oil rig count
Our expectations for a pullback to the balance line were fully justified. The euro recovered from 1.1789 to 1.1865. To remind, the depreciation of the single currency was attributable to earlier remarks by ECB’s Chief Economist Lane. The regulator is concerned about strength in the euro amid weak demand. Market jitters may persist as the ECB is scheduled to meet next week.
Today, market participants will shift their focus to the US nonfarm payrolls report. In line with the median consensus, the US economy created 1.4 mln new jobs in August, vs. 1.763 in July. The unemployment rate is expected to decline to 9.8% from 10.2%.
It should also be noted that the labor market is currently a key gauge for the US Federal Reserve. On Wednesday, the ADP report on new jobs in the private sector fell short of expectations. Furthermore, given that markets will be closed in observance of Labor Day on Monday, high volatility can be expected at 15:30 (GMT 3) and this trend could last for three hours.
We usually refrain from forecasting on jobs report day. Fluctuation levels are the only thing technical factor that can be clearly distinguished. There is strong support at 1.1790. If the report goes down well with the markets, then this level may well be tested. However, if the report turns out weak, the upward correction could gain traction up to 1.1930.